Alex Perry: Perfect. And then I just wanted to ask a similar question for sort of the puts and takes for 4Q gross margins. And then, Jim, any sort of help on how we should start to frame calendar ’24 gross margins? I know that freight has been a big benefit as we exited this year, offset by some heavier promos given the elevated inventory. Just any color on sort of how we should be framing at least gross margins as we move through next year? Thanks.
Jim Swanson: Yeah, let me speak to the fourth quarter first. So, our gross margins were up 70 basis points in the third quarter. We would expect our gross margin to be up slightly better than that in the fourth quarter. And it’s essentially the same drivers that are going to underlie that. We know that we’re going to continue to have or expect to have the freight benefits. Those freight benefits the last couple of quarters have been north of 300 basis points. We should see that same or similar benefit here in the fourth quarter. Channel mix will be positive for us as we’ve got more of those wholesale shipments that we got out in the third quarter. So, the business will be a bit more heavily weighted to our DTC business. So combined, that’s a pretty strong tailwind in the gross margin going into the quarter.
The offset to that would be an increase in our promotional cadence, promotions and markdowns by and large, reflecting moving through that excess inventory through our outlets. So, we feel good about the margin plans that we put forward. Our margin in the third quarter came through a little bit stronger than how we planned coming into the quarter. So, we think we’re well set there. Looking out to next year, I think the factors I’d be thinking about without getting into specifics, this inbound freight benefit that we’ve been seeing this year, that will carry through at least the first quarter of next year. That’s probably about the time that, that would transition and be comparable for the balance of the year. The costing environment has generally been favorable as we’ve finalized our product costing for Spring ’24 and Fall ’24.
And with the favorable — neutral to favorable costing environment, we, by and large, [Technical Difficulty] inventories back down into more normalized levels and a better balance on the full price to close out or clearance activity that should provide a margin benefit. So, now the challenge with that is going to be — we need the top-line as well to offset some of those margin pressures.
Alex Perry: That’s incredibly helpful. Best of luck going forward.
Operator: [Operator Instructions] The next question comes from Jonathan Komp with RW Baird. Please proceed.
Jonathan Komp: Yeah, good afternoon. Thank you. I just want to follow up just to clarify on the PFAS topic. Did I miss or maybe could you quantify the impact that you’re talking about, is that across sort of all product lines and all seasons? And then, are you willing to sort of talk about the impact from destocking that you’re embedding in the first half?
Tim Boyle: Yeah, we’re having a difficult time with the audio, but I think you’re asking about PFAS. Is that correct?
Jonathan Komp: Yeah, hopefully, you can hear me. I was asking if it’s really applicable to all product lines? And then, are you able to quantify the drag that you’re building into the first half commentary?
Tim Boyle: Yeah. So, the PFAS, as I said earlier in the call, is endemic across thousands of products. And so, ours are no exception. Many of our products contain PFAS, and as we’re building newer products and getting out of those, we’re changing, and we don’t intend to have any PFAS products that we’re manufacturing after Fall ’24. So that’s where we’re headed. We’ve got a clear plan to sell the remainder of our PFAS inventory, almost all of it has been sold. And so, we’re expecting that the final liquidation will have minimal impact on the business in the future.
Jim Swanson: And then, John, as it relates to the first half, it’s exceptionally difficult to quantify the impact of what we’re talking about from a PFAS transition perspective. There are so many other variables that are impacting the business. We couldn’t even really estimate what that could look like. It’s meaningful enough though. As we took in our order book, it was a common conversation that we’ve had with our sales team with certain customers, particularly in the U.S., but to some degree, it is touching on earlier globally as well because this is a change in our global product line.
Jonathan Komp: Okay. That’s helpful. Thank you. And one follow-up, just on SOREL. If you could talk a little bit more about what’s contributing to the lower growth outlook for this year? And as we think longer term, I know a year ago at Investor Day, you highlighted SOREL is having the opportunity to grow 20% or higher year in and year out and having a $1 billion revenue opportunity. So, can you just maybe frame out how we should be thinking about low single-digit growth this year for SOREL in terms of the broader opportunity and how you still see it?
Tim Boyle: Yeah. We are still very bullish on the SOREL brand and the opportunities there is clear. I would say that the opportunity for us to continue to grow it into a year-round brand has been slightly more challenging than we thought. And so, it’s still dependent heavily on winter product, whereas as an incredible reputation, our plan is to continue to focus on expanding with the seasonal nature of the products to take advantage of the incredible brand that SOREL has. We’re also going to be expanding gender to get more men’s product and children’s product in the offering. But right now today is still a very famous winter.
